So betting against UK house prices falling seems completely
counterintuitive. And putting money down on a bet that property
prices will keep rising seems like a sure thing,
right?

Well, I spoke to one person who is adamant that property
prices are more likely to fall on an annual basis by January 8,,
2017. He has put the probability of it
happening at 54.9%.

"I appreciate that I seem totally out of line
with the wider market and this could be the albatross
around my neck if I get this wrong," said Jamie Loughead, head of
politics at the UK bookmaker Star Sports, to Business
Insider.

"I should be making it clear that
I/we don't predict the future that this will or won't happen but
we look at the probability purely as percentages on events
occurring."

Star Sports is the "biggest bookmaker you've
never heard of" — they have a small but wealthy client base.
They count footballers, "city boys" — basically brokers, traders
and affluent people who work in London — and even "the odd
billionaire" as customers. Star Sports regularly receives
four-figure bets on anything from horse racing to betting on
house prices. It has a turnover of £200 million annually.

8/11 — based on a
probability of 54.9% that house prices would decrease from
Nationwide's average house price of £196,930.

11/10 — based
on a 45.1% probability that house prices would
increase on an annual basis when Nationwide releases its data
on January 8, 2017.

Jamie
Loughead is the head of politics at UK bookmaker Star
Sports.Jamie
Loughead

“We put up our odds of a house price fall being 'odds-on' last
month and within an hour the story got picked up by a news agency
— shocked with our prediction," said Loughead.

"In fact,within 10 minutesof me
leaving the office that day I received a phone call from a
colleague telling me that we’d taken a £250 bet on house prices
to rise — my colleague was stunned that my odds predicted
prices to fall. He actually thought I’d typed my odds in the
wrong way round! Halifax later reporting a 1.4% drop in values in
February came as a welcome relief to me.”

He said following the initial release of the
odds last month, Star Sports was "bombarded" with people wanting
to make a bet.

However, Loughead said that since then, he is
even more sure that house prices will fall, that the odds are
currently at:

8/13 — based on 58.2%
chance of prices falling.

5/4 — based on 41.8% chance
of prices increasing.

In other words, if you put £13
down on the 8/13 bet and won, you would get £21 back.
If you put £13 on the 5/4 bet, you would get £29.25 back.

So how did he come to this counterintuitive probability
calculation?

"When I did the initial calculation in February, there was a view
that interest rates would increase. On top of that there are
other various factors that have made me calculate the probability
that house prices are more likely to fall," said Loughead.

"The big one is the buy-to-let (BTL) stamp duty tax in April in
six weeks or so, weak overseas investments, and restrictions on
Chinese investors, and general global financial
concerns.

UK
Chancellor George Osborne is delivering the Budget 2016 for
Britain next week.Peter
Macdiarmid/Getty Images

"But the key driver we see now as impacting things is the
budgetnext Wednesday,which is likely to
involve tax changes to BTL landlords, a reduction in
Natwest’s lending (now lending 4.45 times a mortgage applicant’s
salary, as opposed to 4.75 times), the continuing impact of BTL
stamp duty in April, and we also take account of sluggish figures
in Feb — a 1.4% decrease with Halifax and just a 0.3% increase
with Nationwide.

"We continue to believe that foreign investment is on the
decrease, and currently impacted by minor concerns over a Brexit
in June. Also weak wage inflation (partly due to the strong
supply of EU labour) and global economic uncertainty."

I pointed out that those "sluggish" figures are most likely
seasonal as the peak time to buy a property in Britain is between
March and August. During the winter months and during Christmas,
fewer people look at properties due to the festive
season.

However, Loughead said he took this all into account and
still believes that the percentage probability still shows that
it is more likely that prices will fall over the next
year.

"I have gone through countless
predictions (from reports) and spoken to lenders and even if you
factor that in, the threats from landlords saying that the
surcharge will lead to landlords selling off properties will
flood the market with buy to let homes," said Loughead.

"I believe where we are at now is a period of stagnation in
house price growth, which will continue for now, and then prices
will fall. It was to pluck a number from the sky right now on
Nationwide's average house price of £196,930, I would say you can
take 5% off of that at the end of the year."

Well, we will see how this fares in a year's time. Loughead and
Star Sports are even asking you to put your money where your
mouth is.